Chamber of Commerce of the United States of America v. California Air Resources Board

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The federal district court for the Central District of California denied business groups’ motion for a preliminary injunction enjoining California’s laws requiring certain companies to submit annual reports on their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions (SB 253) and requiring certain companies to disclose “climate-related financial risk information” (SB 261). The business groups asserted that the laws compel speech in violation of the First Amendment. As a threshold matter, the court found that the groups’ First Amendment challenge to SB 253 (unlike other claims they brought) was ripe for review even though the California Air Resources Board had yet to issue implementing regulations. Next, the court declined to alter its prior conclusion that both laws were subject to First Amendment review. The court found that both laws regulate commercial speech but applied a different level of scrutiny to each law. For SB 253, the court found that the Scope 1, Scope 2, and Scope 3 disclosure requirements required reporting only of factual, and not misleading, information. The court also found that the required factual disclosures were “uncontroversial” and therefore determined that it would apply the less stringent Zauderer review standard. For SB 261, the court concluded that the reporting requirements compel disclosure of more than factual information and are therefore subject to intermediate scrutiny. Applying the Zauderer standard to SB 253, the court found that the plaintiffs were unlikely to succeed on the merits of their facial First Amendment challenge because the disclosure requirements are reasonably related to the State’s substantial interests in providing reliable information to investors and in reducing emissions and mitigating climate change. However, the court concluded that the State’s interests in addressing misleading speech and in providing reliable information to consumers would likely not satisfy the Zauderer standard. Applying intermediate scrutiny to SB 261, the court found that the plaintiffs were unlikely to succeed on their First Amendment claim because the State “made a sufficient showing as to the benefits of investors’ desire for the specific disclosures required by SB 261 to achieve the legislature’s objective in reliable information that enables investors to make informed judgments about the impact of climate-related risks on their economic choices.” The court found that the State’s interests in emissions reduction and protecting stakeholders from fraud or misrepresentation would not survive First Amendment scrutiny. The court also found that the business groups did not show irreparable harm in the absence of a First Amendment violation and that the balance of equities favored denial of the preliminary injunction.

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The federal district court for the Central District of California dismissed the U.S. Chamber of Commerce and other plaintiffs’ Supremacy Clause (preemption) and extraterritoriality claims challenging California’s laws requiring companies to disclose greenhouse gas emissions and climate-related financial risks. The court dismissed the claims challenging the emissions disclosure law without prejudice as unripe because the law did not on its own mandate action by the plaintiffs’ members or other reporting entities and implementing regulations had not yet been adopted. The court concluded the plaintiffs had standing to challenge the climate-related financial risk disclosure law and that the challenge was ripe but found that the plaintiff failed to state either a Supremacy Clause or extraterritoriality claim. Regarding the Supremacy Clause claim, the court found that the plaintiffs did not support the proposition “that a disclosure regime intended to regulate emissions through third-party actions is a de facto regulatory scheme subject to preemption.” The court also concluded that the law’s compelled disclosure was not preempted based on federalism principles in the Constitution, foreign affairs, or the Clean Air Act. Regarding the extraterritoriality claim, the court found that the plaintiffs could not allege that the law discriminated against interstate commerce or had a discriminatory purpose. Under the Pike test, the court found that the plaintiffs failed to plausibly allege a significant burden on interstate commerce. The court dismissed the extraterritoriality claim without prejudice but dismissed the Supremacy Clause claim with prejudice.

The federal district court for the Central District of California denied plaintiffs’ motion for summary judgment on their facial First Amendment challenge to California’s laws requiring companies to make disclosures regarding their greenhouse gas emissions and climate-related financial risk. The court concluded that additional factual development was necessary to determine whether the laws regulate commercial speech so that intermediate, rather than strict, scrutiny would apply. The court said that it would need, for example, information about whether the laws regulate “a substantial number of companies that do not make potentially misleading environmental claims” as well as information about any “real-world examples” of the laws’ overinclusiveness. The court therefore granted the defendants’ motion to deny or defer summary judgment. The court also said it would address the defendants’ motion to dismiss the extraterritorial regulation and Supremacy Clause claims in a separate decision.

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